What Fuels Oil Company Risk?

Executive Summary

This paper has a simple research question: what determines the risks of oil producing companies listed in Australia and the United States, and are there any differences between their risk attitudes? A literature review is used to develop an integrated theory of firm risk that is validated using a hand-collected database covering active oil and gas production companies in Australia and the United States. Australian firms had less risk management, greater propensity for operational and financial risk, and higher risk on multiple market and accounting measures. After controlling for country of listing, risk in both countries responded as predicted to firm risk propensity and risk management, which each had a small number of deep-seated drivers spread across firm structure, governance, and performance.